Exploration & Production - E&P

What is an 'Exploration & Production - E&P'

An exploration & production (E&P) company is in a specific sector within the oil and gas industry — companies involved in the high-risk/high-reward area of exploration and production focus on finding, augmenting, producing and merchandising different types of oil and gas.

Exploration and production (E&P) is known as the upstream segment of the oil and gas industry. The resource owners and operators of E&Ps work with a variety of contractors such as engineering procurement and construction (EPC) contractors, as well as with joint-venture partners and oil field service companies, and as E&P operators produce oil and gas, they also build infrastructure and collect massive amounts of analytical data.

BREAKING DOWN 'Exploration & Production - E&P'

In locating and extracting nonrenewable resources from the earth, the process of oil and gas exploration and production typically involves four stages.

Exploration

At this stage, the search for hydrocarbons beneath the ground entails geophysical prospecting for shale formations that hold deposits of oil and natural gas. One method of exploration involves seismology, a process whereby substantial vibrations, via explosives or machinery, are produced at the Earth’s surface. Seismic waves travel to the Earth’s mantle, and the respondent force is analyzed at the surface to identify layers of rock that trap reservoirs of oil and natural gas. Exxon Mobil Corporation maintains many large exploratory fields in the Gulf of Mexico, extending operations to 339 deepwater blocks.

Well Development

After identifying potentially viable fields, engineers determine the number of wells needed to meet production requirements and the method of extraction of the liquid hydrocarbons. Platform construction costs are estimated with regard to the site, offshore or onshore, and designs are rendered for systems used to facilitate environmental protections. Newer drilling technologies, prominent in the Marcellus and Bennett shale fields in Pennsylvania and Texas, allow companies such as Chesapeake Energy Corporation to extend horizontal legs about 5,000 feet from vertical wells in search of natural gas pockets, producing four times as much gas at only twice the cost of a vertical well.

Production

Liquid hydrocarbons extracted from wells are separated from the non-saleable components such as water and solid residuals. Natural gas is often processed onsite while oil is piped to a refinery before being offered for sale. Through the first quarter of 2016, Anadarko Petroleum Company was the third-largest producer of natural gas in the United States, selling 2,545 million cubic feet per day (MMcf/d).

Abandonment

As exploratory sites are deemed unproductive or existing operations exhaust capacity, companies plug wells and attempt to restore the areas to environmental states that existed prior to drilling activities. As natural gas prices descended to historic lows in January 2016, many exploratory wells were shuttered as high production costs rendered extraction unprofitable. In 2014, the state of Ohio ramped up efforts to plug nearly 600 orphan wells that posed hazards to surface water and aquifers.